Kier saw pre-tax profit soar by a quarter in 2010/11 despite a significant drop in public sector work.
Posting preliminary results for the year to 30 June 2011, Kier reported a 24 per cent hike in profit before tax, before exceptional items, to £68.9 million, as revenue increased to £2.18bn (2010: £2.1bn). Construction margins improved to 2.7 per cent (2010: 2.6 per cent), while its services margin held at 4.5 per cent.
In the face of increasing competition for “declining public sector work”, the firm said its order books for construction and services increased to £4.3bn (2010: £4.2bn). Its “secured and probable” construction order book stood at £2.3bn (June 2010: £2.1bn), representing 95 per cent of the division’s targeted revenue for 2012 and 46 per cent of its targeted revenue for 2013.
Kier also reported net cash of £165m (2010: £175m).
The firm has seen its construction public sector work drop from 74 per cent to 56 per cent, and it expects this to fall below 50 per cent in the year ahead.
Its focus continues to be on frameworks, and said that the commercial, power and waste sectors are providing “the most significant opportunities”, particularly in London and the south-east in terms of commercial. It said the power market, where it is a “leading” firm, is likely to provide over £13bn of opportunities over the next 10 years.
The results came as Kier revealed it will deliver up to £1bn worth of work in new build and refurbishment work under the Scape National Minor Work framework.
Chief executive Paul Sheffield said: “Our diverse skills and integrated business model have provided greater resilience during these challenging economic conditions. “We are encouraged by the prospects we see in markets such as power and waste, in mixed-use regeneration and in the growth we see in public sector outsourcing.
“Kier continues to benefit from its long-term client relationships and the numerous frameworks in which we are involved. Our network of local offices allows us to respond to the ever-widening requirement of customers for local capability to deliver ‘bundled’ services.”
Kier expects to see the fruits of its services division in the year to 2013, though revenue was up 3 per cent to £484m with operating profit of £21.7m in 2010. Its homes division, which refocused the business towards social and mixed-tenure housing, saw revenue of £153m (2010: £158m) and operating profit improved to £4.2m. Property revenue was at £97m (2010: £53m), with operating profit of £11.1m (2010: £4.5m).
Exceptional items included a reduction in the fine levied by the Office of Fair Trading (OFT), from £18m to £1.7m, with associated costs of £0.7m incurred in the appeal.
The company also announced a full-year dividend of 64 pence per share, a 10 per cent increase on last year. City analysts said Kier shares offer “excellent value” after the company beat expectations. Its share price rose 3.7 per cent this morning.
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